ATCO's Q3 2024 Earnings: EPS Growth and Strategic Moves

ATCO Ltd. (TSX: ACO.X, ACO.Y) reported its third quarter 2024 earnings, showcasing a solid growth trajectory with adjusted earnings rising to $91 million, equating to $0.81 per share, a notable increase from $81 million, or $0.71 per share, in the same quarter last year. The IFRS earnings also saw a slight bump, reflecting an effective management strategy and growing operational capability. Key developments during the quarter are noteworthy; the acquisition of NRB Limited for $40 million enhances ATCO's footing in the modular construction market, a sector poised for growth given current infrastructure demands. The new contract worth $14 million diversifies its project portfolio and contributes positively to future revenue streams.

ATCO's regulated utilities, ATCO Energy Systems and ATCO Australia, played a significant role in the EPS growth in Q3 2024. These utilities contributed 94% of the total capital expenditures in the quarter, amounting to $414 million. The increased investment in these utilities reflects ATCO's commitment to maintaining and enhancing its infrastructure, which in turn drives earnings growth. Additionally, the regulated nature of these utilities provides a stable revenue stream, contributing to the overall EPS increase.

ATCO EnPower's hydrogen development projects also contributed to the company's earnings. The signing of a Letter of Intent with Linde Canada Inc. for the AH3 project, and the successful production of hydrogen through two 1-MW electrolyzers, demonstrate ATCO EnPower's commitment to hydrogen development. These projects have significant potential to supply hydrogen to domestic and international markets, including the Alberta gas grid, industrial, municipal, and commercial transport users. ATCO's work with supportive Federal and Provincial governments to establish policy and frameworks that facilitate investment in the Canadian hydrogen economy further enhances the potential of these projects.

The acquisition of NRB Limited and the awarded mine dry facility contract impacted ATCO's EPS growth in Q3 2024. The NRB acquisition, valued at $40 million, expanded ATCO's modular construction capabilities, while the $14 million mine dry facility contract diversified its project portfolio. These strategic moves contributed to ATCO's EPS growth, with adjusted earnings increasing by $10 million (12.5%) compared to Q3 2023.

The Yellowhead Mainline natural gas project and the AA6 decision significantly contributed to ATCO's EPS growth in Q3 2024. The Yellowhead Mainline project, with its expected commencement in 2026 and on-stream date in 2027, represents a substantial investment in ATCO's energy infrastructure. The AA6 decision, which approved prices for ATCO Gas Australia's gas distribution network for the next five years, determined a rate of return of 8.23%, compared to 5.02% in the previous Access Arrangement. This increase in ROE directly impacted ATCO's earnings, contributing to the CA$0.83 EPS in Q3 2024, up from CA$0.80 in the same quarter of 2023.



In conclusion, ATCO's Q3 2024 earnings reflect a strong performance driven by strategic acquisitions, contract wins, and investments in regulated utilities and hydrogen development projects. The company's EPS growth, along with its commitment to sustainable energy and infrastructure development, positions it well for future success. As ATCO continues to navigate evolving energy and infrastructure challenges, investors can expect a positive outlook driven by strong corporate earnings and technological advancements.